Specifies the subdirectory in which the kernel is located in on the boot partition. If not specified init will look in / and /boot , I'm not sure which order. As of puppy 3.00 this parameter also restricts the boot search for existing pup_save files only pup_saves inside this directory will used. This can be used to allow multiple puppy installation on the same partition to be used without risk of using the wrong one in error.
Example- psubdir=boot/puppy216

If none are found Puppy will load the BaseSFS without any modifications. In many versions this will prompt the user to configure Puppy and ask save is required on reboot/shutdown.
If only one save is found it will load automatically.
If more than one is found the user is prompted to select via a text menu.

Note: the boot files on a multi-session disk are not the standard "PupSave"" files (used for live and frugal). They look for and make save files differently.